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The past several decades have witnessed a trend away from regulation and towards market competition in a wide variety of economic sectors including, for example, telecommunications, financial services, health care, transportation and energy markets. The antitrust laws have assumed an enhanced role in a post-regulatory environment, particularly in the area of mergers. This article is part of a forthcoming book published by Edward Elgar Publishing, Competition Policy and Merger Analysis in Deregulated and Newly Competitive Industries (Peter Carstensen, Univ. Of Wisconsin, and Beth Farmer, Penn State Dickinson Law School, eds.). The European experience offers a useful contrast to American deregulation in a number of market sectors. The European project of deregulation and market liberalization is proceeding primarily in a highly regulatory, top-down fashion directed by the executive and administrative bodies of the Community, both enforcing European statutory law and jawboning member state governments to bring competition to previously regulated industries and eliminate subsidies that benefit national champion industries. In key sectors of the economy, including such important industries as gas and electric utilities and banking, the goals of competition on the one hand, and national protectionism, on the other, continue to clash despite the best hopes of the original architects and modern leaders. By comparison, the market for airline transportation has become increasingly competitive since deregulation, reflected in increasingly substantive review and ultimate approval of a series of mergers in the industry.

The policy of deregulation in the European Union offers an illuminating contrast to deregulation in American industries for four reasons: (1) it is the result of conscious economic policy choice adopted from the outset of the Community, (2) it paints with a broad brush, encompassing many industries, (3) issues of federalism are more acute as the regulators in Brussels seek to impose market competition, or "liberalisation" in European parlance, and limit protectionism, or "state aid," on the sovereign member states, and (4) all three functions are bundled in the Directorate General for Competition, which is responsible for enforcing the antitrust laws, promoting liberalization and enforcing regulations against state aid in most sectors of the economy. The European strategy of deregulation and competition has proceeded unevenly and has been more successful in some industries, and some countries, than others. The agricultural and financial industries, for example, are still characterized by important national protections while sectors including energy, both gas and electricity, and airline transportation have shaken off the chains of regulation and leapt ahead into growing intra-national competition.

Several conclusions follow from a review of the European experience with deregulation and subsequent mergers that provide a contrast with the similar deregulation undertakings in the same industries in the United States. First, enforcement and regulatory authority are largely bundled at the supra-national level of the EU within Commission Directorates General. DG Comp is responsible for enforcing European Union antitrust law, investigating and directing national deregulation of markets, and finally, enforcing the rules against discriminatory state support and preferences in most industries (though individual member states also have responsibility for antitrust enforcement, deregulating their markets and eliminating state aid). Centralizing the authority within the Commission allows it to develop and enforce a consistent plan to promote competition in Europe, but runs the risk that one prong or another will be neglected. Indeed, the complexity of the Community organization, increases the likelihood that deregulation will not take place evenly in all sectors of the economy. Second, deregulation has proceeded more quickly and smoothly in some industries than in others. This chapter discusses the energy, airline transportation and financial services sectors, which provide an overview of the varying Community approach to de-regulation and a good comparison with United States legal developments discussed in other chapters. To briefly summarize: energy and financial services are officially de-regulated but are not yet fully competitive, there are important conflicts between national protection and European competitive goals in the energy sector, and, finally and competition in transportation markets is proceeding in airline services and access to airports, while railroads remain highly regulated in much of Europe. Third, the barriers to Europe-wide competition depend, in part, on characteristics peculiar to each industry. In general, the firms in the industries discussed were founded in particular local markets, in most cases before the founding of the European Community, and some of the geographic markets are still largely national. Gas and electric utilities markets suffer from two barriers to European competition; state or municipal ownership and the need to access the transmission lines or pipelines to move the product geographically. Cross-border competition in transportation depends on the mode: railroads face interconnection technology issues and state aid while national airlines may benefit from state protection and aid but are less limited by technical bottlenecks. Financial institutions are subject to regulation by national banking agencies, which may not view competition as an important goal. In addition, the legal barriers to branching to another country are low, but the psychological barriers appear to be high as consumers are reluctant to trust a foreign bank with their assets. Finally, national officials have granted preferences to national firms, most recently in a cross-border merger of electric and gas utility firms. The article concludes that liberalization of European markets has a positive economic effect, noting that an OECD report quantifies the benefit as yielding a 2% to 3% annual growth in GDP.